EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into on July
19, 2002 (the "Effective Date"), by and between Xxxx X. Xxxxx (the "Executive")
and Castle Dental Centers, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, The Company wishes to employ the Executive as Senior Vice
President, and the Executive wishes to be so employed by the Company, all upon
the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the promises and mutual covenants
and obligations herein set forth and for other good and valuable consideration,
the receipt, sufficiency and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows, intending to be legally bound:
1. Employment and Term. The Company hereby employs the Executive to
serve as Senior Vice President. The term of this Agreement shall begin on the
Effective Date and shall terminate thirty-six (36) months from the Effective
Date, unless earlier terminated by either party hereto in accordance with the
provisions of Section 5 hereof; provided, however, that after the expiration of
the initial term, the term of this Agreement shall be automatically extended on
the anniversary date hereof (each, an "Extension Date"), commencing on the
expiration of the initial term, for two successive twelve-month periods, unless
the Company or the Executive delivers to the other party a notice specifying
such party's intent not to extend the Term for an additional twelve-month
period, at least ninety (90) days prior to the Extension Date in such year.
During the term of this Agreement, the terms of employment shall be as set forth
herein unless modified by the Executive and the Company in accordance with the
provisions of Section 10 hereof. The Executive hereby agrees to accept such
employment and to perform the services specified herein, all upon the terms and
conditions hereinafter set forth.
2. Position and Responsibilities. The Executive shall report to, and be
subject to the general direction and control of, the Chief Executive Officer of
the Company. The Executive shall have other obligations, duties, authority and
power to do all acts and things as are customarily done by a person holding the
same or equivalent position or performing duties similar to those to be
performed by executives in corporations of similar size to the Company and shall
perform such managerial duties and responsibilities for the Company which are
not inconsistent with the Executive's position as may reasonably be assigned to
him by the Chief Executive Officer of the Company. Unless otherwise agreed to by
the Executive, the Executive shall be based at the Company's offices located in
the greater metropolitan area of Houston, Texas.
3. Extent of Service. The Executive shall devote his full business time
and attention to the business of the Company. During the term of this Agreement,
however, it shall not be a violation of this Agreement for the Executive to (a)
serve on any corporate board or committee thereof with the approval of the Board
of Directors, (b) serve on any academic, university, civic or charitable board
of directors, (c) deliver lectures or make teaching or speaking engagements, (d)
testify as a witness in litigation involving a former employer, or (e) manage
personal investments, so long as such activities do not, taken together,
materially interfere with the performance of the Executive's responsibilities
under this Agreement.
4. Compensation.
(a) Salary. In consideration of the services to be rendered by the
Executive to the Company, the Company will pay the Executive a salary ("Salary")
of $14,584 per month during the term of this Agreement. Such Salary will be
payable in accordance with the Company's customary payroll practices and shall
be subject to all applicable federal and state withholding, payroll and other
taxes. In addition, the amount of the Executive's Salary may be increased from
time to time during the term of this Agreement, by, and at the sole discretion
of, the Compensation Committee of the Company's Board of Directors (the
"Compensation Committee"), which shall review the Executive's Salary no less
regularly than annually.
(b) Bonus. The Executive shall be eligible for an annual bonus of up
to 50% of Executive's annual Salary. Any bonus paid to Executive will be paid
out of an annual bonus pool of up to $500,000 available to the Company's Senior
Managers. In 2002, a guaranteed bonus will be paid to the Executive in the
amount of $66,667 (the "2002 Bonus") out of a pool of $233,333. One-half of the
2002 Bonus will be payable at the end of the pay period during which the
restructuring of the Company's senior credit agreement is completed
(contemplated to take place in July 2002) and one-half will be payable at the
end of the pay period during which the 2002 annual audit is completed and
delivered to the Company. The remaining $266,667 of available bonus potential
for the Company's Senior Managers in 2002 (including any portion thereof to be
paid to the Executive) will be discretionary and based on the criteria approved
by the Compensation Committee within 30 days of such committee's formation;
provided, however, that if the criteria approved by the Compensation Committee
are not reasonably acceptable to the Executive, the Executive shall be entitled
to terminate his employment hereunder upon 90 days' notice to the Company, and
upon any such termination, (i) the Executive shall not be entitled to any
Severance Payment or Additional Benefits (as defined in Section 5(f)), and (ii)
the Executive shall not be bound by the restrictive covenant set forth in
Section 6(b). Except for the 2002 Bonus, any bonus paid to the Executive shall
be based on performance and shall be payable at the sole discretion of the
Compensation Committee.
(c) Expenses. During the term of this Agreement, the Company shall
pay or reimburse the Executive for all reasonable out-of-pocket expenses for
travel, meals, hotel accommodations, entertainment and the like incurred by him
in connection with the business of the Company upon submission by him of an
appropriate statement documenting such expenses as required by the Internal
Revenue Code of 1986, as amended (the "Code").
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(d) Vacation. The Executive shall be entitled to 15 days of paid
vacation for each calendar year during the term of this Agreement, earned in
accordance with the Company's vacation policy for its executive officers as in
effect from time to time. Vacation shall start to accrue on the first day of
each calendar year. The Company shall pay the Executive for any accrued but
unused portion of vacation and any such unused portion of vacation shall not be
carried forward to the next year.
(e) Benefits. During the term of this Agreement, the Executive shall
be entitled to participate in and to receive all rights and benefits under any
bonus, stock option, equity incentive, pension, retirement, life, disability,
medical and dental, health and accident and profit sharing or deferred
compensation plans and such other plan or plans as may be implemented by the
Company during the term of this Agreement. The Company shall provide the
Executive with life insurance in an amount equal to the greater of (i) fifty
percent (50%) of the Executive's annual Salary and (ii) the amount to which the
Executive is entitled pursuant to the Company policy, if any, for its executive
employees. The Executive shall also be entitled to participate in and to receive
all rights and benefits under any plan or program adopted by the Company for any
other or group of other executive employees of the Company, including without
limitation, the rights and benefits under the directors' and officers' liability
insurance currently in place under the Company's insurance program for the
directors and officers of the Company, and any indemnification agreements
entered into by the Company with its officers and directors providing them with
indemnification from the Company for claims arising out of their services as
officers and directors of the Company.
5. Termination.
(a) Termination by Company; Discharge for Cause. The Company shall
be entitled to terminate this Agreement and the Executive's employment with the
Company at any time and for whatever reason, or at any time for "Cause" (as
defined below), by written notice to the Executive. Termination of the
Executive's employment by the Company shall constitute a termination for "Cause"
if such termination is for one or more of the following reasons: (i) the willful
failure or refusal of the Executive to render services to the Company in
accordance with his obligations under this Agreement, including, without
limitation, the failure or refusal of the Executive to comply with the work
rules, policies, procedures, and directives as established by the Board of
Directors and consistent with this Agreement if such failure or refusal
continues for a period of not less than 30 days after written notice outlining
the situation is given by the Company to the Executive; (ii) a determination by
the Board of Directors, made after reasonable inquiry (including an opportunity
for the Executive to be heard), that the Executive has committed an act of fraud
or embezzlement; (iii) a determination by the Board of Directors, made after
reasonable inquiry (including an opportunity for the Executive to be heard),
that the Executive has committed any other action with the intent to injure the
Company; (iv) the Executive having been convicted of a felony or a crime
involving moral turpitude; (v) a determination by the Board of Directors, made
after reasonable inquiry (including an opportunity for the Executive to be
heard), that the Executive has misappropriated the property of the Company; (vi)
a determination by the Board of Directors, made after reasonable inquiry
(including an opportunity for the Executive to be heard), that the Executive has
engaged in
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personal misconduct which has materially injured the Company, including, without
limitation, engaging in harassment or discrimination in violation of the
Company's policies; or (vii) the Executive having willfully violated any law or
regulation relating to the business of the Company which results in material
injury to the Company. In the event of the Executive's termination by the
Company for Cause hereunder, the Executive shall be entitled to no severance or
other termination benefits except for any unpaid Salary accrued through the date
of termination. A termination of this Agreement by the Company without Cause
pursuant to this Section 5(a) shall entitle the Executive to the Severance
Payment and other benefits specified in Section 5(f) hereof. In addition, the
parties acknowledge and agree that any expiration of this Agreement pursuant to
Section 1 or any election by the Company not to extend the term of this
Agreement pursuant to Section 1 shall not constitute a termination of this
Agreement or of the Executive's employment by the Company; provided, however,
that in any such event and upon the termination of the Executive's employment
due to the expiration or non-extension of this Agreement (each, the "Expiration
Date"), the Company shall pay the Executive, within 30 days after the Expiration
Date, an amount equal to (i) the Executive's then-current monthly salary for a
period of four (4) months, commencing on the Expiration Date, plus (ii) the
Executive's then-current monthly salary multiplied by the number of complete
12-month periods, commencing on the date of this Agreement, that the Executive
has been employed by the Company through the Expiration Date, plus (iii) a
portion of the bonus received by the Executive related to the fiscal year
immediately prior to the year in which the Expiration Date occurs which is
proportionate to the number of days during such year that the Executive was
employed by the Company through the Expiration Date.
(b) Death. If the Executive dies during the term of this Agreement
and while in the employ of the Company, this Agreement shall automatically
terminate and the Company shall have no further obligation to the Executive or
his estate except that the Company shall pay to the Executive's estate that
portion of his Salary and benefits accrued through the date of death. All such
payments to the Executive's estate shall be made in the same manner and at the
same time as the Executive's Salary.
(c) Disability. If during the term of this Agreement, the Executive
shall be prevented from performing his duties hereunder for either (i) a period
of 90 days or (ii) 150 days in any 12-month period by reason of disability, then
the Company, on 30 days prior written notice to the Executive, may terminate
this Agreement. For purposes of this Agreement, the Executive shall be deemed to
have become disabled when the Board of Directors of the Company, upon
verification by a physician designated by the Company, shall have determined
that the Executive has become physically or mentally unable (excluding
infrequent and temporary absences due to ordinary illness) to perform the
essential functions of his duties under this Agreement with or without
reasonable accommodation. In the event of a termination pursuant to this
paragraph (c), the Company shall be relieved of all its obligations under this
Agreement, except that the Company shall pay to the Executive or his estate in
the event of his subsequent death, that portion of the Executive's Salary and
benefits accrued through the date of such termination. All such payments to the
Executive or his estate shall be made in the same manner and at the same time as
his Salary and would have been paid to him had he not become disabled.
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(d) Termination for Good Reason. The Executive shall be entitled to
terminate this Agreement and his employment with the Company at any time upon 30
days written notice to the Company for "Good Reason" (as defined below). The
Executive's termination of employment shall be for "Good Reason" if such
termination is a result of any of the following events:
(i) the Executive is assigned any responsibilities or duties
materially inconsistent with his position, duties, responsibilities and status
with the Company as in effect at the date of this Agreement or as may be
assigned to the Executive pursuant to Section 2 hereof;
(ii) the Salary payable to the Executive pursuant to Section
4(a) hereof is reduced by an amount in excess of five percent (5%), unless the
Executive has otherwise agreed to such reduction;
(iii) there is (1) a failure by the Company or any successor to
the Company or its assets to continue to provide to the Executive any material
benefit, bonus, profit sharing, incentive, remuneration or compensation plan,
stock ownership or purchase plan, stock option plan, life insurance, disability
plan, pension plan or retirement plan in which the Executive was entitled to
participate in as at the date of this Agreement or subsequent thereto, and the
Company fails to provide a substitute therefor which is substantially similar to
the discontinued material benefit or plan, or (2) the taking by the Company of
any action that materially and adversely affects the Executive's participation
in or materially reduces his rights or benefits relative to other senior
executives under or pursuant to any such plan, but excluding any such action
that is required by law;
(iv) without Executive's consent, the Company requires the
executive to relocate to any city or community other than one within a 50 mile
radius of the greater metropolitan area of Houston, Texas, except for required
travel on the Company's business to an extent substantially consistent with the
Executive's business obligations under this Agreement; or
(v) there is any material breach by the Company of any
provision of this Agreement.
Upon the Executive's termination of this Agreement for Good Reason,
the Executive shall be entitled to the Severance Payment and other benefits
specified in Section 5(f) hereof.
(e) Voluntary Termination. Notwithstanding anything to the contrary
herein, the Executive shall be entitled to voluntarily terminate this Agreement
and his employment with the Company at his pleasure upon 30 days written notice
to such effect. In such event, the Executive shall not be entitled to any
further compensation other than any unpaid Salary and benefits accrued through
the last day worked. At the Company's option, the Company may pay to the
Executive the salary and benefits that the Executive would have received during
such 30
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day period in lieu of requiring the Executive to remain in the employment of the
Company for such 30 day period.
(f) Termination Benefits Upon Involuntary Termination or Termination
for Good Reason. In the event that (i) the Company terminates this Agreement and
the Executive's employment with the Company for any reason other than for Cause
(as defined in Section 5(a) hereof), death or disability (as defined in Section
5(c) hereof) or (ii) the Executive terminates this Agreement and his employment
with the Company for Good Reason (as set forth in Section 5(d) hereof), then the
Company shall pay the Executive, within 30 days after the date of termination,
an amount (the "Severance Payment") equal to one year's Salary, payable over a
12-month period after such termination in accordance with the Company's
customary payroll practices. In addition, following such termination, the
Executive shall be entitled to the following benefits (collectively, the
"Additional Benefits"):
(i) continued coverage, at the Company's cost, under the Company's
group health plan for the applicable coverage period under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") but only if
Executive elects such COBRA continuation in accordance with the time limits and
in the applicable COBRA regulations; and
(ii) an amount equal to the sum of (A) any unreimbursed expenses
incurred by the Executive in the performance of his duties hereunder through the
date of termination, plus (B) any accrued and unused vacation time or other
unpaid benefits as of the date of termination.
The parties agree that, because there can be no exact measure of the
damages which would occur to the Executive as a result of termination of
employment, such payments contemplated in this Section 5(f) shall be deemed to
constitute liquidated damages and not a penalty and the Company agrees that the
Executive shall not be required to mitigate his damages. The Severance Payment
and the Additional Benefits shall be paid in lieu of any amounts payable by
reason of any severance package or agreement offered or in effect by the
Company, and shall be paid only if the Executive executes a termination
agreement releasing all legally waivable claims arising from the Executive's
employment.
(g) Survival. Notwithstanding the termination of this Agreement under
this Section 5, all provisions of this Agreement hereof which by their terms are
to be performed following the termination hereof shall survive such termination
and be continuing obligations.
6. Covenants of the Executive
(a) Confidential Information. The Executive shall not, without the
prior written consent of the Company (except as may be required in connection
with any judicial or administrative proceeding or inquiry), disclose to any
person, other than an officer or director of the Company or a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance by the Executive of his duties as an executive officer of the
Company, any confidential information obtained by him, before or after the date
hereof, while in
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the employ of the Company with respect to its business or assets, including, but
not limited to, confidential information relating to the technology, properties,
accounts, books, records, suppliers, trade secrets and contracts of the Company
(collectively, the "Confidential Information"); provided, however, that
Confidential Information shall not include any information known or available to
the public (other than as a result of unauthorized disclosure by the Executive).
(b) Covenant Not to Compete. The Executive acknowledges that he has been
and will continue to be provided with Confidential Information in the course of
his employment with the Company. The Executive agrees that in order to protect
the Company's Confidential Information, it is necessary to enter into the
following restrictive covenant, which is ancillary to the enforceable promises
between the Company and the Executive in Section 6(a) of this Agreement. The
Executive covenants that the Executive shall, during the term of this Agreement
and for a period of one (1) year following the termination of the Executive's
employment hereunder for whatever reason other than the expiration of this
Agreement by its terms pursuant to Section 1 or pursuant to Section 4(b),
observe the following separate and independent covenants:
(i) Neither the Executive nor any Affiliate (as defined in
subsection (c) below) will, without the prior written consent of the Company,
within the Area (as defined in subsection (c) below), either directly or
indirectly, (1) become financially interested in a Competing Enterprise (as
defined in subsection (c) below) (other than as a holder of less than five
percent (5%) of the outstanding voting securities of any entity whose voting
securities are listed on a national securities exchange or quoted by the NASDAQ
Stock Market, including the OTC Bulletin Board or any comparable system), or (2)
engage in or be employed by any Competing Enterprise as a consultant, officer,
director, or executive or managerial employee.
(ii) Neither the Executive nor any Affiliate will, without the prior
written consent of the Company, either directly or indirectly, on Executive's
own behalf or in the service or on behalf of others, solicit, divert or
appropriate, or attempt to solicit, divert, or appropriate, to any Competing
Enterprise, any person or entity whose account with the Company was serviced by
or under the Executive's direction or supervision during the term of this
Agreement.
(iii) Neither the Executive nor any Affiliate will, without the
Company's prior written consent, either directly or indirectly, on the
Executive's own behalf or in the service or on behalf of others, solicit,
divert, or hire away, or attempt to solicit, divert, or hire away, to any
Competing Enterprise, any person employed by the Company, any of its
subsidiaries or any dental practices affiliated with the Company or any of its
subsidiaries through a long-term services agreement (collectively, the "Affected
Parties"), whether or not such employee is a full-time or a temporary employee
of any such Affected Party and whether or not such employment is pursuant to
written agreement and whether or not such employment is at will.
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(c) The following terms used in Section 6(b) shall have the definitions
set forth below:
"Affiliate" means any person or entity directly or indirectly
controlling, controlled by, or under common control with the Executive. As used
herein, the word "control" means the power to direct the management and affairs
of a person.
"Area" means (i) any "Metropolitan Statistical Area" or "Primary
Metropolitan Statistical Area" (as each such term is defined by the Federal
Office of Management and Budget) in which the Company owns a dental center or
has a dental center under development and (ii) within 10 miles of any dental
center owned or under development by the Company that is not located in a
Metropolitan Statistical Area or a Primary Metropolitan Statistical Area.
"Competing Enterprise" means any person or any business organization of
whatever form, engaged directly or indirectly within the Area in the business of
the Company or any of its subsidiaries or any other related business conducted
by the Company or any of its subsidiaries as of the time of the termination of
the Executive's employment by the Company.
(d) The parties hereto agree that the Executive's breach of any
covenant contained in this Section 6 could result in substantial damage to the
Company which would be impossible to ascertain. By reason of that fact, the
Executive agrees that, in the event of such breach, the Company shall have the
right to enforce such provisions by injunctive or other relief in equity.
(e) The parties hereto agree that if at any time while the Executive is
subject to the provisions of Section 6(b), the Company breaches its obligation,
if any, to make any Severance Payment to the Executive, and such breach is not
cured within 10 days after written notice to the Company from the Executive,
then the Executive shall be released from his obligations under Section 6(b).
7. Consent and Waiver by Third Parties. The Executive hereby represents
and warrants that he has obtained all necessary waivers and/or consents from
third parties as to enable him to accept employment with the Company on the
terms and conditions set forth herein and to execute and perform this Agreement
without being in conflict with any other agreement, obligations or understanding
with any such third party.
8. Notices. All notices, requests, consents and other communications under
this Agreement shall be in writing and shall be delivered personally or mailed,
certified or registered mail, return receipt requested, postage prepaid or
delivered by commercial overnight courier service, charges prepaid to the
following addresses, or such other addresses as shall be given by notice
delivered hereunder, and shall be deemed to have been given upon delivery, if
delivered personally, three business days after mailing, if mailed, or one
business day after delivery to the overnight courier service, if delivered by
overnight courier service:
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If to the Executive: Xxxx X. Xxxxx
00 Xxxxxxxxx Xxxxx Xxxxx
Xxxxxxxx, Xxxxx 00000
If to the Company: Castle Dental Centers, Inc.
0000 Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Chairman, Compensation Committee
Either party hereto may designate a different address by providing written
notice of such new address to the other party hereto.
9. Remedies. Nothing contained in this Agreement shall be construed as
prohibiting the Company from pursuing any other remedies available to it for any
breach or threatened breach, including, without limitation, the recovery of
money damages. These covenants and disclosures shall each be construed as
independent of any other provisions in this Agreement, and the existence of any
claim or cause of action by the Executive against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants and agreements.
10. Waivers and Modifications. This Agreement may be modified, and the
rights and remedies of any provision hereof may be waived, only in accordance
with this Section 10. No modification or waiver by the Company shall be
effective without the consent of at least a majority of the Compensation
Committee of the Board of Directors then in office at the time of such
modification or waiver. No waiver by either party of any breach by the other or
any provision hereof shall be deemed to be a waiver of any later or other breach
thereof or as a waiver of any other provision of this Agreement. This Agreement
supersedes all prior agreements between the Executive and the Company and sets
forth all the terms of the understandings between the parties with reference to
the subject matter set forth herein and may not be waived, changed, discharged
or terminated orally or by any course of dealing between the parties, but only
by an instrument in writing signed by the party against whom any waiver, change,
discharge or termination is sought.
11. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Texas and shall be binding upon and enforceable against the
Executive's heirs and legal representatives.
12. Severability. In case of one or more of the provisions contained in
this Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
been a part of this Agreement. Notwithstanding the foregoing, however, if for
any reason any provision containing restrictions set forth herein is held to
cover an area or to be for a length of time which is unreasonable, or in any
other way is construed to be too broad or to any extent invalid, any such
provision shall not be determined to be null, void and of no effect, but to the
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extent the same is or would be valid or enforceable under applicable law, any
court of competent jurisdiction shall construe and interpret or reform this
Agreement to provide for a restriction having the maximum enforceable area, time
period and other provisions (not greater than those contained herein) as shall
be valid and enforceable under applicable law.
13. Assignment; Representations. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors, legal representatives and
assigns and upon the Executive, his heirs, executors, administrators, and
representatives. Any reference to the Company herein shall mean the Company as
well as any successors thereto. The Company represents that it has all corporate
power and authority necessary to enter into this Agreement and perform its
obligations hereunder. This Agreement has been duly authorized, executed and
delivered by the Company.
[Signature page follows]
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Employment Agreement as of the date and year first above written.
COMPANY:
CASTLE DENTAL CENTERS, INC.
By: /s/ Xxxxx X. Xxxxx
-----------------------------------
Name: Xxxxx X. Xxxxx
---------------------------------------
Title: Chief Executive Officer
-------------------------------------
EXECUTIVE:
By: /s/ Xxxx X. Xxxxx
----------------------------------------
Xxxx X. Xxxxx
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